Let’s Talk About the Prime Price Hike

Amazon announced an upcoming increase in Prime membership fees — jumping from $99 to $119 annually — during their shareholder conference call last Thursday. Since the announcement, headlines have been dominated by the subject, with articles ranging from “here’s what happened” to “here’s what it means” to “here’s how to get around the price hike.”

By increasing the price of Prime, Amazon is asserting their dominance. While Amazon has long attempted to “figure how to charge less,” according to Jeff Bezos in 2001, this situation is different. According to Bloomberg, Amazon’s earnings exceeded expectations, yet the retail giant decided to up the price of Prime anyway.

Why? Because they feel like they can. Amazon has been diligently integrating themselves into the lives of their customers: Alexa is in the home, Prime Video is on the TV screen, Twitch Prime is on the computer, Amazon Music is on the speakers, two day shipping has become the norm, deliveries are being made in cars, subscriptions are shipped automatically monthly… the list goes on. Amazon predicts that the customers that are using Prime to the fullest are unlikely to cancel now.

Innovate and integrate

If the number of Prime subscribers stays consistent, the retailer will be getting a $2B+ paycheck from the price hike. According to the 2018 shareholder letter, Bezos attributes Amazon’s success in part to “hundreds of millions of divinely discontent customers around the world who push to make us better each and every day.” It’s reasonable to expect Amazon to invest the earnings from their price hike back into their offerings — giving Prime members even more reasons to stay loyal to the service.